Taxing Strip Clubs, Booze And E-Cigs: The Arrogant And Greedy Team Up To Take Your Money

There is a theory that says the tax laws should be used to do one thing -- raise revenue to pay for public services. Taxes should not be used to engineer society, promote social agendas, foster economic development, or help anyone in particular. This theory has merit. Adherence would lead to less cronyism, fewer economic distortions, and less regulation through the tax code. State governments, of course, violate these principles all the time.

Who are the perpetrators? Those striving for bad tax policy represent an odd coalition of people who want to run your life, and people who simply want your money.

The Georgia House of Representatives approved a constitutional amendment to make strip clubs pay for the state's fight against child sex trafficking. Under the proposed amendment, all adult entertainment businesses would have to pay $5,000 per year or 1 percent of their revenue, whichever is greater, into a state fund for child victims of human trafficking. Forget for a moment the First Amendment issues involved in deciding what is an adult entertainment business. This proposal illustrates all that is wrong with the way states use the tax laws.

There are people in Georgia who get all riled up (and not in the good way) over the thought of strip clubs. The thought of naked ladies dancing offends some to the core. They are happy to impose a tax on such venues simply because they find them offensive. There is another group of people who think child sex trafficking is horrible and that the government should do something about it. To police such horrible crimes, the government needs money. That is where those who want to abolish exotic dancing come in.

Place a tax on strip clubs to pay for the public effort to curb child sex trafficking. A more mind-numbingly dumb idea is hard to imagine. First, what is the connection between strip clubs and child sex trafficking? None. I am aware of no studies or evidence that suggest strip club patrons engage in child sex trafficking. Second, if combating child sex trafficking is a good thing, why not appropriate general funds and pay for it with broad-based taxes on income and sales?

A recent Washington PostWonkblog article alleged that the relatively low taxes on alcohol are killing Americans. I have rarely read such an irresponsible piece. Its premise is that alcohol consumption is bad because it leads to drunk driving and the spread of sexually transmitted diseases. It is an unprincipled call for higher taxes. Politicians who live for the sake of telling others how to live are eyeing booze. They are running out of places to keep people from smoking. It is too early to place restrictions on pot. But there are a lot of folks who would like to tax alcohol more heavily to raise revenue for things like teacher pay and road construction. The abolitionists and those who live off government largesse have much in common.

Then, inexplicably, the Tax Policy Center (TPC) published a blog post that essentially calls for higher sugar taxes. The TPC is usually really good on the tax policy stuff, but calling for an excise tax on sugar reflects a political agenda more than it does sound tax policy. The call for taxes on sugar and fat and soda emanates from the belief of some people that they have an inherent right to tell you what to eat. Maybe it's because they hate fat people (most proponents are model thin). Maybe it's because they hate poor people (all the taxes they propose are regressive). I think it's just because they like telling people what to do. Says the TPC: "Maybe a sin tax is just the thing shoppers need to help them live a life on the light and healthful" side. I am glad the TPC knows what we "need." I guess us simple folks just ain't smart enough to figure it out.

Of course, politicians who are always on the hunt for more money often applaud attempts to tax narrow consumption. They can use the money to help friends, family, and campaign contributors. Here is the TPC again, on a soda tax proposal in Vermont:

Now consider this. Vermont's proposed soda tax is projected to raise $35 million. Did I mention that Vermont needs to close an expected budget shortfall? I'm sure Vermont lawmakers are concerned about the health of their constituents and their shopping choices, but they're concerned about Vermont's fiscal health, too.

Finally on this topic, District of Columbia Mayor Muriel Bowser (D) submitted her budget recently. Her goal is to combat homelessness in the nation's capital. Even a libertarian like me thinks that is a laudable goal. She wants to pay for it in part by taxing e-cigarettes like real cigarettes. She also wants to raise the sales tax. We can discuss the irony of using the most regressive taxes to help the poorest people at a later date.

E-cigarette taxation best illustrates the confluence of arrogance and avarice. Those who cannot keep themselves from playing nanny have already begun to bar e-cigarettes from public places (to prevent the dreaded secondhand water vapor). And of course we have the obligatory restrictions on their use by kids. But the tobacco abolitionists would like to tax e-cigarettes with the knowledge that if you tax something, you get less of it. Don't be fooled. These people do not care about your health. They care about lording over you.

But there are others (like Bowser) who cast a covetous eye on electronic smokes. Two factors drive that thinking. If people smoke real cigarettes less, the states will lose tens of millions of dollars. E-cigarettes need to be taxed to replace that revenue (because it really isn't about your health). Since a lot of tobacco tax revenue is earmarked for schools, taxing e-cigarettes is all about the kids. Raising real taxes to pay for public services is hard. Teaming up with the prohibitionists is much easier.

This post is part of a longer article that first appeared in State Tax Notes.

I'm deputy publisher of Tax Analysts. I specialize in tax and government issues. I’m a contributing editor of State Tax Notes and author of its weekly column The Politics of State Taxation. I also write for the Tax Analysts blog. I teach state and local public finance and f...

Tax Analysts is the leading publisher of tax news, analysis and commentary for the global community. More than 150,000 tax professionals in law and accounting firms, corporations, and government agencies rely on our in-depth federal, state, and international content each da...